The chief economist for Lanux Corporation, a large appliance manufacturer, estimated the firm’s short-run cost function for television using an average variable cost function of the form AVC = a + bQ + cQ2 where AVC = dollars per television and Q = number of television produced each month. Total fixed cost each month is $180,000. The following results were obtained: a) Are the estimates ˆa , ˆb , and cˆ statistically significant at the 2 percent level of significance? Which is/are significant and which is/are not? b) Do the results indicate that the average variable cost curve is ∪-shaped? How do you know? c) If Lanux Corporation produces 8,000 television per month, what is the estimated average variable cost? Marginal cost? Total variable cost? Total cost d) Answer part c, assuming that Lanux produces 10,000 television monthly. e) At what level of outputwilaverage variable cost at a minimum? What is the minimum average variable cost?
The chief economist for Lanux Corporation, a large appliance manufacturer, estimated the firm’s short-run cost function for television using an average variable cost function of the form AVC = a + bQ + cQ2 where AVC = dollars per television and Q = number of television produced each month. Total fixed cost each month is $180,000. The following results were obtained: a) Are the estimates ˆa , ˆb , and cˆ statistically significant at the 2 percent level of significance? Which is/are significant and which is/are not? b) Do the results indicate that the average variable cost curve is ∪-shaped? How do you know? c) If Lanux Corporation produces 8,000 television per month, what is the estimated average variable cost? Marginal cost? Total variable cost? Total cost d) Answer part c, assuming that Lanux produces 10,000 television monthly. e) At what level of outputwilaverage variable cost at a minimum? What is the minimum average variable cost?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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2. The chief economist for Lanux Corporation, a large appliance manufacturer, estimated the firm’s short-run cost function for television using an average variable cost function of the form AVC = a + bQ + cQ2 where AVC = dollars per television and Q = number of television produced each month. Total fixed cost each month is $180,000. The following results were obtained:
a) Are the estimates ˆa , ˆb , and cˆ statistically significant at the 2 percent level of significance? Which is/are significant and which is/are not?
b) Do the results indicate that the average variable cost curve is ∪-shaped? How do you know?
c) If Lanux Corporation produces 8,000 television per month, what is the estimated average variable cost? Marginal cost? Total variable cost? Total cost
d) Answer part c, assuming that Lanux produces 10,000 television monthly.
e) At what level of outputwilaverage variable cost at a minimum? What is the minimum average variable cost?
Transcribed Image Text:P-VALUE ON F
DEPENDENT VARIABLE: AVC
OBSERVATIONS: 19
RSQUARE
0.7360
F-RATIO
39.428
0.0001
PARAMETER
ESTIMATE
191.93
0.0305
0.0000024
STANDARD
ERROR
54.65
0.00789
0.00000098
TRATIO
3.512
23.866
2.449
P-VALUE
0.0029
0.0014
VARIABLE
INTERCEPT
0.0262
Q2
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